Top Tip – Using Your Own Transport for Business – R03, AF1
Last updated on August 13th, 2020 at 10:36 am
This subject arose over lunch with friends recently and I thought it might be useful for others whether you’re sitting the CII exams R03 or AF1 or whether it applies to you or your clients.
The first thing to say is that there’s no tax charge when, as an employee, you use your own car for business purposes and you’re not reimbursed for any more than the allowed rate. (If you’re reimbursed for private travel, then this will be a taxable benefit).
My friend uses her own car to get her to her place of work which is 25 miles away from her home and then uses it from there to carry out her work. The 25-mile commute to her place of work is treated as private and not business mileage. (Note though that travel to a temporary place of work is normally classed as business travel). Obviously the travel she then does from there to carry out her job is classed as business travel.
You are entitled to deduct qualifying travelling expenses from taxable pay if they are incurred ‘performing your employee duties’. In most cases though, employers reimburse business mileage so that their employee’s expenditure is balanced by the payment received from them. Should this not be the case, then you’d need to claim tax relief yourself (just as a self-employed person would).
As you are probably aware, the revenue has a tax-free approved system of mileage rates which can be paid to employees without any income tax or NI. Currently the figures are 45p a mile for the first 10,000 business miles in the tax year and 25p for each additional mile over 10,000.
My friend gets paid more than these statutory amounts paid to her by her employer so is taxed on the excess usually done through a complicated system of an annual adjustment and then re-adjustment of her tax code.
If her employer had paid her less than these amounts then she could claim tax relief for the difference.
Just as an aside – if you take a colleague on a business trip in your own car, the employer could also pay you up to 5p per mile for each passenger free of tax.
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